Terri Luttrell, Compliance & Engagement Director with Abrigo (formerly Banker’s Toolbox), is CAMS-Audit certified and has over 20 years in the banking industry, working both in medium and large community banks in the areas of compliance/fraud, commercial lending, and deposit operations. As an AML consultant, she has helped institutions develop BSA/OFAC programs to ensure all regulatory requirements are met, and managed a team of AML investigators for a large/cross-border institution, among other roles. definition of the BSA at this time. Greater priorities for closing loopholes were mentioned, such as: • The beneficial ownership registry mandated by the Corporate Transparency Act, and • Deterring money laundering and public corruption occurring via high-end real estate. Scott Rembrandt, Deputy Assistant Secretary for Strategic Policy in the Office of Terrorist Financing and Financial Crimes, said that further regulations for art dealers are not required until “we've tackled more systemic issues, like creating a beneficial ownership registry to crack down on shell companies.” Efforts to Combat Money Laundering Through Art and Antiquities It’s important to note that much of the requirements of AMLA are to be created and implemented by FinCEN, a small division of the U.S. Treasury already struggling with a lack of funding and other resources. The Biden administration officials are asking Congress to send $210 million to FinCEN under the U.S. government’s proposed 2023 budget, which marks a roughly 30% increase from its current funding. While this indicates that FinCEN is underfunded, the budget is not expected to have bipartisan support. FinCEN Issued an Advisory on Kleptocracy and Foreign Public Corruption in April of 2022, urging financial institutions to focus efforts on detecting the proceeds of public corruption. The advisory emphasizes that corrupt public officials launder their illicit profits through various means, including shell companies or by purchasing highend assets, such as real estate, yachts, private jets, and high-value art. Was this an afterthought after the study postponed what might have been another loophole closed to money launderers as other countries have done? The lack of U.S. legislation and oversight has promoted the U.S. to the number one money laundering country globally, with shell companies used to purchase high-end collectibles and cultural properties. As criticism continues from global watchdog organizations such as the Financial Action Task Force (FATF), concerns have increased since the Russian invasion of Ukraine. With Russian sanctions implemented worldwide, oligarchs and other kleptocrats have seized loopholes and are hiding assets into highend purchases, including art and antiquities. A lack of regulatory oversight could lead to serious national security issues. Financial Institution Action to Detect and Prevent Money Laundering Art and Antiquities In the meantime, what should financial institutions do to ensure that money laundering through art and antiquities is not occurring through their bank? It is never too early to bump up your knowledge in these areas and prepare for regulations surrounding antiquities dealers. Although antiquities is positioned to be included under the BSA with all of the monitoring and reporting requirement that entails, it would be prudent for financial institutions to apply the exact same requirements to art dealers, including: • Both art and antiquities dealers in your enterprisewide risk assessment • Recognizing that art and antiquities dealers, and customers who use them, are at higher risk for money laundering, terrorist financing, and political corruption • Creating processes and procedures for enhanced due diligence for art and antiquities trading • Applying beneficial ownership requirements to any shell corporations, including those dealing in high-end art • Submitting suspicious activity reports for any large cash purchases with unknown sources of funds FinCEN issued a notice in March 2021 informing financial institutions of efforts related to trade in antiquities and art. The notice includes clear expectations for SAR filing if suspicious activity is detected in these areas. Having proactive procedures in place to detect money laundering in art and antiquities will prepare you for what is sure to be further regulations around art dealers. It will also show your banking regulators that you understand your risk related to both antiquities and the art communities. January • February 2023 23
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